MyTravel considers offering bondholders 8% of restructured company's equity

By Jeff Pines

Washington, Nov. 3 - MyTravel Group plc is considering a restructuring that would give its bondholders an 8% stake in the restructured company. But if the company lacks support of a sufficient majority of bondholders by Nov. 17, MyTravel said it would reduce the proposed stake to 4%.

If a court-approved restructuring takes place instead of an out-of-court restructuring, the bondholders would only get a 2% stake in the reorganized company, MyTravel said. MyTravel is a Manchester, England-based tour operator.

The company has £216 million of 7% convertible bonds due 2007. An ad hoc committee of noteholders responded to MyTravel's offer with disappointment.

"The committee is disappointed that the company has taken precipitative action to file a scheme of arrangement without first negotiating with convertible bondholders. The committee is concerned that the company's conduct may make insolvency proceedings more likely. The proposal today does not have the committee's support. The committee's preference remains a consensual deal but it must be a fair deal," the committee said.

Shareholders would only get a 4% stake in the reorganized company whether the restructuring is done in court or out of it.

The company said it already has indications of support from its lenders holding most of its commitments.

In a statement, MyTravel's board said it wants the restructuring to be consensual and is working toward that end. If the consensual approach fails, the company will be ready with a court-administered approach, it said.

MyTravel has started the legal process and is seeking the court's guidance on convening a meeting of creditors and shareholders to approve the reorganization.

The initial hearing is scheduled for Nov. 18.

The restructuring requires the support of the lenders and the shareholders but not the bondholders, the company said.

Under the proposed plan, a new holding company would be created, which would get all of MyTravel's assets. The new holding company would issue shares to MyTravel's ordinary shareholders and the converting creditors as in the consensual restructuring plan.

The new holding company assumes all responsibility for payment of all liabilities of the company, including trade creditors, other than liabilities such as the obligations to bondholders that are subordinated in a winding up of the company. This allows the new holding company to carry on as a holding company of the MyTravel Group free of claims by the bondholders. The plan would not affect creditors of subsidiaries.

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